The units of an item available for sale during the year were as follows:
Jan. 1 Inventory 12 units at $5,400 $ 64,800
Aug. 7 Purchase 18 units at $6,000 108,000
Dec. 11 Purchase 15 units at $6,480 97,200
Available for sale 45 units $270,000
There are 14 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the inventory cost using (a) the first-in, first-out (FIFO) method; (b) the last-in, first-out (LIFO) method; and (c) the weighted average cost method.
Answer:
a. First-in, first-out (FIFO) method: $90,720 = 14 units × $6,480
b. Last-in, first-out (LIFO) method: $76,800 = [(12 units × $5,400) + (2 units × $6,000)]
c. Weighted average cost method: $84,000 (14 units × $6,000), where average cost = $6,000 = $270,000 ÷ 45 units